LatAm credit spreads tighten as US Treasuries sell off

Davide Scigliuzzo

3 MIN. DE LECTURA

NEW YORK, Feb 17 (IFR) - Latin American credits ended Tuesday’s session unchanged in price but tighter in spread terms after optimism over a resolution to the stalemate between Greece and its European creditors contributed to a sell-off in US Treasuries.

However, with much of the region still on holiday because of Carnival celebrations, activity in the secondary markets remained light.

“You could say the market is closing tighter just because Treasuries are selling off, but there is no one to trade with,” said a corporate bond trader in New York.

This came as the yield on the 10-year US Treasury jumped 13bp to hit 2.13% by late afternoon on optimism over Greek debt negotiations and on expectations that the Federal Reserve could guide towards a June rate increase at its next policy meeting on March 17-18.

With high-grade corporate bond prices remaining steady, spreads narrowed as a result. For instance, the 2024s issued by Brazil state-run oil company Petrobras ended the day some 10bp-15bp tighter at 515bp-510bp over Treasuries.

Elsewhere in Brazil, USJ Acucar became the latest sugar producer to see its bond drop several points as the sector continues to struggle with high leverage and depressed sugar prices.

The company’s 9.875% US$275m 2019s have fallen 13 points since Wednesday’s close to end the day at a cash price of 35.

“Clearly the company is under pressure like all sugar companies in Brazil,” said a second trader in New York. “They are highly levered and the price of what they sell is not going up.”

The sovereign’s 2022s were spotted a quarter of a point higher in price at 49-50 and the 2027s a quarter of a point lower at 43.50-44.50, according to a broker in New York.

PIPELINE

Mexican media company TV Azteca is bringing to market a rare project bond related to the development of the Andean country’s fiber optic network. Pricing is expected toward the end of February.

Costa Rica has chosen Deutsche Bank and HSBC as lead managers on an up to US$1bn international bond sale that could take place as early as this month, market sources told IFR. (Reporting by Davide Scigliuzzo; Editing by Paul Kilby)